M-453 Monetized Installment Sale

M-453 Monetized Installment Sale

 

The M453 Monetized Installment Sale tax strategy allows those selling highly appreciated assets (home, land, business, commercial property) to defer the capital gains tax for up to 30 years, while also walking away from escrow with the bulk of the sales proceeds; the ideal scenario.

 

https://mkgenterprisesbusinesstrust.com/m453-mbt-intermediary

 

What is an Installment Sale?

 An installment sale is a method in which an asset can be sold for value, whereas the payment for asset occurs over an extended period of time.  This type of sale method functions under the Internal Revenue Code Section number 453.Tax code section (453) was drafted to specifically address installment sales and has been in effect since the establishment of the tax code in 1913.

The difference between the traditional installment sale and the installment sale illustrated above is that a monetized loan based on the principal amount is provided to the seller immediately after the sale. Under the traditional installment sale, the capital gains tax is not owed until principal under the financed sale is received. So, for example, if the installment sale involves payment of ten percent (10%) of the principal for ten (10) years, the seller would pay ten percent (10%) of the capital gains tax owed on the sale each year for ten (10) years; the tax is incurred as principal is received.

In a smartly executed installment sale, the seller does not have to wait for payment of the principal for thirty (30) years (or whatever the deferral period is) in order to defer the payment of the capital gains tax for thirty (30) years. The seller, by way of a monetized loan from a third party lender, is able to receive almost all of the principal on the sale immediately and still not have to pay the capital gains tax on the sale for up to thirty (30) years!!! 

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